The Real Deal New York

Dumbo, DoBro office rents see record surge at end of 2015

Driven by Empire Stores space, average ask jumps record 30 percent

January 12, 2016 02:10PM
By Rich Bockmann

Rendering of Empire Stores in Dumbo (Credit: STUDIO V Architecture)

Rendering of Empire Stores in Dumbo (Credit: STUDIO V Architecture)

On the back of a pricey block of real estate hitting the market at Midtown Equities’ Empire Stores, office asking rents in Downtown Brooklyn/Dumbo jumped 30 percent at the end of the year – the biggest spike in a decade.

Asking rents in the north Brooklyn neighborhoods climbed to an historic high of $51.99 in the fourth quarter of 2015, according to research from Newmark Grubb Knight Frank.

Though record prices aren’t terribly remarkable – asks have been steadily climbing more or less over the last four years – the rate of increase should raise some eyebrows.

Asking rents jumped 30 percent from $40.25 per square foot at the end of 2014, which is the largest year-over-year spike the submarket has seen in at least 10 years – and quite possibly the largest ever.

Large-scale new development projects such as Industry City in Sunset Park and the Brooklyn Navy Yard have been steadily pushing up asking rents.

But, according to Newmark, the recent upsurge can largely be attributed to the Empire Stores development opening at Brooklyn Bridge Park in Dumbo at the end of 2015.

The 450,000-square-foot development – a partnership between Midtown Equities, Rockwood Capital and the HK Organization to redevelop a row of seven Civil War-era warehouses along the East River – broke a borough record in 2013 when the partners announced they would ask $85 per square foot for the rooftop office space.

Leasing began in late 2014 and as of December the developers said they’ve leased out spaces ranging from 45,000 to 150,000 square feet, as The Real Deal previously reported. Furniture maker West Elm inked a 150,000-square-foot lease deal to anchor the former coffee warehouses.

The overall spread between rents in Downtown Brooklyn and Downtown Manhattan shrunk to 15 percent, down from 36 percent in 2012. The availability rate in the fourth quarter was 6.3 percent, down from 6.9 percent a year earlier.

Similar trends were spotted to the north in Queens, where Long Island City office rents continued to climb steadily to a new record high of $34.28 per square foot on average.

Deals such as Macy’s relocation from Downtown Brooklyn to 150,000 square feet at the Factory Building drove leasing activity in the fourth quarter.

Net absorption on the year was 308,208 square feet – the largest positive total in five years. Due to new inventory added to the market, however, the availability rate finished at 8.9 percent, up slightly from 8.6 percent in the fourth quarter of 2014.

Correction: A previous version of this post incorrectly stated the asking rent and overall square footage of Empire Stores.